Labor Market Power, Self-Employment, and Development

Francesco Amodio, Pamela Medina and Monica Morlacco

No 17543, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper shows that self-employment shapes labor market power in low-income countries, with implications for industrial development. Using Peruvian data, we find that wage-setting power increases with employer concentration but less so where self-employment is more prevalent. A general equilibrium model shows that in oligopsonistic labor markets, self-employment raises the supply elasticity of wage labor, weakening employer market power. However, by the same mechanism, pro-competitive policies aimed at expanding wage employment and reducing reliance on self-employment may unintentionally strengthen labor market power, undermining their objectives.

Keywords: Development; Monopsony; Sorting; Self-employment (search for similar items in EconPapers)
JEL-codes: J2 J3 J42 L10 O14 O54 (search for similar items in EconPapers)
Date: 2022-09
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Related works:
Journal Article: Labor Market Power, Self-Employment, and Development (2025)
Working Paper: Labor Market Power, Self-Employment, and Development (2024)
Working Paper: Labor Market Power, Self-Employment, and Development (2022)
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